Black Friday History Week: How the UIGEA Changed Everything

If you want to get down to the nitty gritty of the Black Friday indictments, that's what it comes down to - A loosely defined statement rushed through on the last day before Congress adjourned for the 2006 elections.

Called the Unlawful Internet Gambling Enforcement Act, the UIGEA, in short, “prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”

What that sentence means is still, over five years later, open to legal interpretation. But has nonetheless resulted in the indictments of over a dozen industry figures, numerous arrests, millions of dollars in seized funds and the virtual crippling of a multi-biliion dollar industry in the United States.

Black Friday - Five Years in the Works

Bush: Signed the UIGEA into law.

The indictments of the owners of PokerStars, Full Tilt Poker and Absolute Poker/UB.com (plus five payment processors) may not have come down until April 15 of last year but the hammer had been slowly dropping for almost five years.

Passed in late 2006, the Unlawful Internet Gambling Enforcement Act (UIGEA) was, as mentioned, a last-second add-on to a Safe Ports bill.

Having virtually nothing to do with online poker per se, the law was shoehorned onto the Safe Ports Act as a means of "protecting” against the movement of funds by offshore terrorism groups.

Known originally as "H.R. 4411", the bill was merged with another anti-Internet gambling act, H.R. 4777, the Internet Gambling Prohibition Act, in July 2006 to form the full Internet Gambling Prohibition and Enforcement Act.

H.R. 4411 ostensibly prohibited Internet gambling transactions made through American financial institutions but also tried to update the Wire Act of 1961 (which prohibits gambling over telephone wires) to include sports betting, casino and poker Web sites.

The Act also expressly prohibited lotteries based on sports events but activities such as securities and commodities traded on U.S. exchanges were not considered "gambling." Horse racing was also exempted from the Act.

While not expressly declaring any form of online gambling illegal, it did make the processing of any online gambling transactions illegal.

Despite several attempts to both repeal the bill and pass new legislation amending the UIGEA, particularly by Rep. Barney Frank, the bill still holds as law.

The Rise and Fall of the Big Three

Learn, chat and play with the pros became defacto poker motto.

Despite a 270-day implementation period, shortly after the UIGEA was passed the fallout began across the online poker and sports betting industries.

Party Poker, at that time the largest poker site on the US market, voluntarily withdrew from offering services to the US market despite it making up 80% of its overall business.

Founder Anurag Dikshit eventually settled with the US government for $300 million over its participation in the US market prior to the UIGEA.

Other, smaller sites also withdrew from accepting US players over the first few months. Stepping into the void, however, were Full Tilt Poker and PokerStars.

Citing legal advice that assured them online poker fell outside of the realm of the UIGEA, PokerStars and Full Tilt Poker ramped up their marketing and promotional efforts quickly to grab market share.

With expansive outlays on TV time and growing stables of sponsored pros, the two sites scooped up almost all of the Party refugees and within a year were easily the most dominant forces in the US market - where they remained until the Department of Justice seized the PokerStars and Full Tilt Poker .com domains on April 15.

Absolute Poker and Ultimate Bet also continued to accept US players post-UIGEA, although a forthcoming superuser scandal, financial meltdown and eventual re-birth/merger on the new Cereus network prevented the two sites from ever competing on the FTP/PokerStars level.

Moving Money the New Crux and Ultimate Downfall

While legal opinion convinced both PokerStars and Full Tilt to stay in the US market, the UIGEA still changed how sites could move money from American players to and from accounts.

Daniel Tzvetkoff, the man behind the DOJ case.

With direct credit card payments, PayPal and bank transfers eventually becoming off limits as enforcement came into play, third-party payment processors began to sprout up to take the weight.

Falling directly in line with the UIGEA's mandate however, payment processors quickly fell into the DOJ's sights.

In what was a sign of things to come, in July of 2007 the DOJ arrested the founders of payment processor Neteller and seized millions of dollars in funds reportedly transferred from US players to online gambling sites. Notably caught up in the seizures was $800k of Isaac Haxton's take from finishing second in the 2007 PCA main event.

The owners eventually reached a settlement and relinquished over $136 million in funds to the DOJ. Haxton also eventually got his money back.

Given increasing uncertainty over the legality of transferring money from US players, PokerStars and Full Tilt Poker began looking for alternate processing solutions.

One of those solutions turned out to be the Daniel Tzvetkoff-led Intabill, an Australian payment processing company that masked online gambling transactions as retail purchases.

Four years later, after stealing well over $1 million from the online poker sites while processing those transactions, Tzvetkoff was arrested in a Las Vegas casino.

A few months later, he reportedly turned state's witness and his private correspondence reportedly makes up the bulk of the DOJ's case against the 11 indicted individuals.

OMG - SERIOUSLY??? (THIRD PARAGRAPH FIRST SENTENCE - Directly beneath the heading "The Rise and Fall of the Big Three"...)

Anurag Dikshit - IS THIS SOME KIND OF SICK JOKE? Anu - RAG? DickShit? Is this some anti-bumblasting "Easter-Egg" of a joke? I am still laughing my arse off from reading this. If this actually IS this persons name? Oh boy!!!! I am at a loss for words. (doesnt happen often).

:D

...speechless

Brian G. 2012-04-11 07:48:47

It makes me angry every time I think about how this all started. God damn politicians eroding everything that was once good about this country.

PokerListings.com is the world's largest and most trusted online poker guide, offering the best online poker bonus deals guaranteed, exclusive site reviews and the most free poker content available on the Web.